Image Source : FILE PHOTO Representative image
Financial planning young professionals: If you are young and just starting to earn, it is important to take proactive steps to save on income tax in the new year. While experienced employees may already know how to make the right decisions for tax savings, young professionals often feel confused and may make incorrect choices. Here are some important tips to help you navigate the process and make informed decisions.
Invest in equity-linked savings schemes
Equity-linked savings schemes (ELSS) are equity mutual funds with diversified portfolios that give you the opportunity to invest in the equity market along with high returns. Apart from high returns, it allows you to claim tax deductions under Section 80C of the Income Tax Act. The maximum amount of deduction that can be claimed is Rs 1.50 lakh in a financial year.
Take a health insurance policy
The cost of medical treatment is rising. Given this, buying health insurance is very important. It helps reduce the financial risks of medical emergencies by covering hospitalisation expenses. Additionally, health insurance allows you to claim a tax deduction under Section 80D of the Income Tax Act for the amount of premiums paid in a year.
You can claim a deduction of up to Rs 25,000 for paying premiums on insurance for yourself, your spouse, and dependent children. An additional deduction of Rs 25,000 can be claimed for your parents. If you or your parents are senior citizens, the total deduction limit can go up to Rs 1,00,000.
Consider financial planning
It is not necessary to do financial planning only when you are in the income tax slab. Young earners fall in the tax-free limit (Rs 2.5 lakh under the old tax system and Rs 3 lakh under the new tax system). According to HDFC Life, filing income tax returns helps in creating a paper trail that can act as proof of income while applying for a loan or any credit product.
Invest according to the target
Targets are very important in investment. Always set a clear objective while starting an investment and choose the right amount, period and type of investment based on that. For example, if you plan to buy a car worth Rs 10 lakh in the next 4 years, you can consider investing in equity mutual fund schemes like ELSS, which give both tax benefits and potentially better returns.
Always be active
When it comes to tax planning, always try to be proactive. Avoid last-minute rush, as this can lead to wrong investment decisions and mistakes. Start your tax planning at the beginning of the financial year itself. This gives you a full year to find the best tax-saving avenues according to your needs.
Additionally, make sure to file your income tax returns by the due date, which is typically July 31. Delaying the filing could result in penalties, interest, and late fees. It is a good idea to consult a financial expert to help you create a plan and file your taxes accurately and on time.
Also Read: New Year 2025: Things to consider before buying a property for a successful purchase | Check here
Also Read: Gold price today January 2: Check rates in Delhi, Chennai, Mumbai, Kolkata and other major cities
